Frank Gadd, pictured with his neighbour Bernard Wallwork, successfully took his then managing agent, Peverel, to a tribunal in 2011. Photograph: Graham Turner for the Guardian

The Office of Fair Trading is to investigate the property management industry following complaints from flat-owners about over-charging and poor quality services by some providers.

For years owners of leasehold properties such as flats and retirement homes have complained that management firms have been overcharging to manage the properties they live in. These firms typically maintain, clean and carrying out building repairs in return for an annual service charge.

The OFT said it was now looking into this area, and wants to hear from interested parties who can shed some light on why the management of leasehold homes in England and Wales isn't working well for consumers.

It announced the study days before a separate OFT investigation into the activities of the UK's biggest property managers is due to report.

Property management companies often provide the services themselves or through employed contractors, but the system has been wide open to be abuse by unscrupulous companies.

One of the firms accused of overcharging leaseholders for a ride in the past, Peverel, went into administration in 2011, only to be later bought by private equity for £62m.

In 2011 the Guardian featured the case Frank Gadd who was paying huge service charges out of his pension to Peverel. The service charge hit £4,400 a year for a run of four maisonettes with no common areas. After taking the agents to a tribunal, the charge fell to £200.

An existing OFT investigation into suspected breaches of competition law in relation to the supply and installation of entry systems and alleged collusive tendering, is due to report on Friday.

Cavendish Elithorn, OFT executive director, said: "This market is significant, with as many as five million people living in leasehold properties. Costs can be very substantial and we have been provided with a number of examples showing significant financial impact on individual residents and the difficulty in exerting control over the process.

"However, before formally launching our study we want to hear from key players and interested parties in this sector, as well as from the residents themselves, so we get a clear idea of the areas on which we should be focusing."

The investigation was immediately welcomed by Leasehold Knowledge Partnership, which has long campaigned for better leaseholder rights.

"It is excellent that the OFT has announced this investigation – at last, dozy officialdom is waking up to the abuses in leasehold, ranging from small-scale Rackmans to huge corporate players. The amounts of money involved are staggering," said spokesman, Sebastian O'Kelly.

The inquiry was also welcomed by Peter Bottomley, the MP for Woking, and another campaigner on the issue.

"I hope this important study will expose and help to end a number of the unacceptable practices in the sector. Leaseholders and MPs will be pleased that the OFT has announced this vital wide-reaching market study into residential property management services.

"Our first aim was to end abuse in the retirement sector. It is better that it will now be covering the whole of the leasehold sector."